Is a Living Trust Right for You?

The “Revocable Living Trust” (“RLT”) has been a popular estate planning tool for many years. An RLT may be worthwhile, or not. This article is a brief overview of some of the benefits and common misconceptions about RLTs.

An RLT is a written agreement (“trust agreement”) between you (“grantor”), and a trustee of your choosing, which provides for the trustee to hold your property during your lifetime, pursuant to the terms of the trust agreement. All of your assets (the “principal”) should be transferred into the trust. You can use as much of the income and principal of the trust as you choose. You can be the trustee and retain control over the trust’s investments. You can change the terms of the trust agreement or revoke the trust entirely, at any time. Upon your death, the assets remaining in the trust are distributed as provided in trust agreement. A married couple can create reciprocal trusts or even a joint trust.

Some of the benefits of an RLT are:

* Quicker Distributions: Probating a will and marshalling estate assets for distribution takes time. With an RLT, the trustee can make immediate
distributions and continue paying bills as usual.

* Privacy: Probate records are public. Anyone can obtain a copy of your will and see information you may wish to keep private. New Jersey does not, but other states require that an inventory of your assets be filed with the probate court. Such information about an RLT is usually not public.

* Multiple States: If you own real property in another state, an RLT can avoid the trouble and expense of an ancillary probate proceeding in the other state.

* Incompetence: If you should become mentally incompetent or physically disabled, your successor trustee can continue to manage you assets without interruption or the need to have a court appointed guardian or custodian of your assets.

Some common misconceptions about RLTs are:

* RLTs save taxes: RLTs do not save income or estate taxes. The income and assets of an RLT are subject to taxation in the same manner as if you continued to own your assets outright and the appropriate tax returns still have to be prepared and taxes paid.

* Accountings can be avoided: Not so. A trustee has the same duty as an executor under a will to account to your beneficiaries. They have the right demand a formal judicial accounting, which must be filed with and reviewed by the probate court. The proceeding is part of the public record and is an expensive proceeding even in a modest estate. RLTs are also subject to the same challenges and litigation as in will contests. The advantages of an RLT in terms of privacy and cost savings can easily be lost.

* I won’t need a Last Will and Testament: Again, not true. It is very important to have a will that provides for that any assets you hold outside the RLT be put into the RLT at your death, as well as what should happen if you revoke your RLT and fail to do a new will.

* My beneficiaries will save the cost and trouble of a probate proceeding: In some states, probating a will is a complicated, time consuming and expensive process. Not true in New Jersey, where probating a will is usually a simple matter which is accomplished without the need for a formal preceding or even an attorney.

Conclusion:

RLTs make a lot of sense for some people and none at all for others. You have to consider all factors as they relate to your particular situation to make an informed choice about a living trust. You should consult with your attorney and financial advisor to assist you in making the decision that’s right for you.

DiFrancesco, Bateman, Kunzman, Davis, Lehrer & Flaum PC (http://www.dbnjlawblog.com) is a full service law firm in New Jersey which provides a broad range of legal services.

The information contained in this blog is intended solely for informational purposes; it is a advertising publication of DiFrancesco, Bateman, Kunzman, Davis, Lehrer & Flaum P.C.This publication is intended to alert recipients of developments in the law and is not intended to provide legal counsel, advice or opinion on any specific facts or circumstances. The contents are intended as general information only. You are urged to consult a member of this firm or your own attorney concerning your particular situation and any specific legal questions you might have.